Confidence Among U.S. Homebuilders Climbs for a Sixth Month

Cheaper properties and borrowing costs at record lows are attracting buyers and bolstering homebuilders such as Toll Brothers Inc. Photographer: Daniel Acker/Bloomberg

Oct. 16 (Bloomberg) -- Confidence among U.S. homebuilders
climbed for a sixth straight month in October, adding to signs
the real-estate market is healing.

The National Association of Home Builders/Wells Fargo
builder sentiment index increased to 41 this month, the highest
since June 2006, from 40 in September, according to figures from
the Washington-based group released today. The median forecast
in a Bloomberg survey of economists called for an increase to
41. Readings below 50 mean more respondents said conditions were
poor.

Record-low borrowing costs are helping sustain sales for
homebuilders such as Hovnanian Enterprises Inc. Strict credit
standards and slowing payroll growth remain obstacles for the
industry that was at the center of the financial crisis.

“Many builders are reporting increases in the number of
serious buyers visiting their sales offices,” Barry Rutenberg,
chairman of the NAHB and a builder from Gainesville, Florida,
said in a statement.

Estimates of 49 economists in the Bloomberg survey ranged
from 40 to 43. The gauge, which was first published in January
1985, averaged 54 in the five years leading to the recession
that started in December 2007. It reached a record low of 8 in
January 2009.

An index of single-family home sales was unchanged at 42
this month. A measure of buyer traffic jumped five points to 35,
its highest level since April 2006.

Assessing Outlook

The survey asks builders to characterize current sales as
“good,” “fair” or “poor” and to gauge prospective buyers’
traffic. It also asks participants to assess the outlook for the
next six months.

Confidence improved among builders in three of four U.S.
regions, falling in the Midwest. The West led gains with a
reading of 49, up from 44 in September.

“The slight gain in builder confidence this month is an
indication that, while still moving forward, the speed at which
the housing recovery is proceeding is being moderated by the
various constraints such as tight credit, difficult appraisals
and more recently, the limited inventory of buildable lots in
certain markets,” NAHB Chief Economist David Crowe said in a
statement.

Hovnanian, based in Red Bank, New Jersey, is among
homebuilders seeing gains in sales this year as buyers return to
the market.

‘Overall Strength’

“We certainly believe the housing market’s recent overall
strength and our significant improved sales pace this year
indicates that the market for new homes has truly bounced off
the bottom,” Larry Sorsby, the company’s chief financial
officer, said at an Oct. 4 conference. The market “is already
in a period of gradual recovery,” he said.

Mortgage rates near record lows are making it cheaper to
buy a home. The average fixed rate on a 30-year loan was 3.39
percent in the week ending Oct. 11, down from 4.12 percent a
year ago.

The Federal Reserve’s monetary easing is helping push rates
lower as the central banks seeks to spur the three-year economic
recovery and push the jobless rate lower. The Fed last month
announced a third round of large-scale asset purchases, saying
it would buy $40 billion a month in mortgage-backed securities.

“Housing is once more showing signs of life,” John
Williams, president of the Federal Reserve Bank of San
Francisco, said in a speech yesterday. “The housing recovery
includes a rebound in home construction, something particularly
important for the health of the overall economy.”